Yorkshire businesses experienced strong growth in the last six months of 2010, but their optimism is starting to give way again because of concerns about domestic demand, according to Lloyds TSB Commercial.
Director for the Midlands and the North John Robson said: "Businesses in Yorkshire remain cautious about prospects for sales, orders and profits – and we are seeing that reflected in our index.
"Many businesses will be planning price increases to keep profits at current levels, but in general local firms are evenly split on the chances for a profitable 2011. It is still true to say that more companies are optimistic about sales, than not."
Mr Robson was commenting on Lloyds TSB Commercial's latest Business in Britain report, a twice-yearly study that tracks firms' views on sales, order books and profits for the next six months.
The report shows that despite almost universal concerns about domestic demand, most businesses are hopeful about the potential for overseas trade and are upbeat about their trading prospects for the year ahead.
Over two fifths of Yorkshire companies believe exports will grow in the first half of 2011, and their business activity will gain momentum this year.
Almost a half expect to continue exporting at current levels, while just four per cent expect a fall. Businesses across the region are cautious about investment and recruitment.
Almost a quarter plan to boost investment over the coming six months, while one in seven plan to cut back. A fifth expect staff numbers to rise over the next six months, while just over a one in ten anticipate a reduction. Two thirds say they expect no change in staff numbers during the first half of the year.
John Robson added: "It is easy to understand why Yorkshire businesses are choosing not to invest. Worries about the economic outlook coupled with the fact that most firms aren't operating at full capacity suggest that, on the face of it, a cautious line on spending may seem to be the right approach.
"But there is a real danger that without continuing investment and innovation, the competitiveness of regional businesses could be undermined – and the worries firms harbour about weaker growth could become a self-fulfilling prophecy."
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